The Pursuit of the Goals

Since clubs are focused on winning matches and eventually championships, they must find ways to efficiently employ their resources in the pursuit of their goals.

Where do those resources come from? With regards to financial resources, most football clubs rely on the traditional revenue streams as we have seen in the section 1.1.2: Match day receipts, media rights, sponsorship agreements, and other commercial revenues, especially merchandising. But do the clubs identified in Category A adopt different approaches to those in Category B or C? Do Top Clubs engage in more “business-like” activities than their peers in lower categories? Table 2.3 shows that there does not seem to be a great difference between the clubs in different categories as far as their business strategy is concerned.

Table 2.3 – Comparison of clubs’ business activities¹

Category A Category B Category C

Business Activities Juventus Manchester United

Nantes Atlantique

Chelsea FC

Neuchâtel Xamax

Bolton Wanderers

Gate receipts ü ü ü ü ü ü

Broadcast revenues ü ü ü ü ü ü

Sponsorship ü ü ü ü ü ü

Merchandising ü ü ü ü ü ü

Stock market ü ü No² ü No ü

Catering No³ ü ü ü ü ü

Stadium and Facility Mgmt. ü ³ ü No ü ⁶ ü ü ⁴

Non-football Event Mgmt. ü ³ ü ü ⁵ ü No ü ⁵

1) Information from club websites and presentations during CIES visits.

2) Currently French Law does not allow for French football clubs to be floated on the stock market. This may change soon as there is growing pressure from the clubs to have this option available. A recent article in France Football revealed that 15 clubs in the French 1st division were favourable to this.

3) Juventus currently manages the Mondo Juve complex and is currently restructuring its stadium and will, after construction, have restaurant and hospitality.

4) Includes the DeVere Whites Hotel in the Reebok Stadium.

5) FC Nantes Atlantique engages in activities such as Equestrian competitions, Weekend travel packages and Concerts while Bolton organises conferences in the Reebok Stadium, houses the Reebok European Design Department and runs school programmes with local schools.

6)Includes Chelsea Village Hotel

122 UEFA Financial Report 2002-2003.

123 Interview with Antonio MARCHESI

Furthermore, if we isolate the “Stock Market” category which is a commonly used financial tool in the business world but still uncommon in the associative world of sport, and consider a range of clubs we will find that clubs across all our three categories are using this source to raise capital.¹²⁴

Immediately we notice clubs which would fit our Category C such as Watford Leisure (Watford FC), Sheffield United and Preston North End. In Category B we could identify top-division clubs with a regional-to-national following such as Tottenham Hotspur Plc. Lastly, we also find clubs from Category A like SS Lazio, AS Roma and Manchester United. So what differentiates these club-categories in terms of fi nancial resources? Freddy Rumo, President of the Executive Board of Neuchâtel Xamax, says that it is merely the scale which is important:

‘A club like Xamax does exactly what FC Basel or the bigger clubs do. The difference is about proportion, measures and means.”¹²⁵

Although clubs may have different proportions in their fan base, television rights, sponsorship and merchandise deals and in the end very different financial means, clubs across categories use similar tools but in proportion to their means.

But, are cash inflows an end in itself? A leader in the sports-law field in France, Michel Guénaire states that it is not enough to have a diversified set of revenue streams without a healthy financial management. He says that there is no long-term sporting success without healthy finances and sound management principles.¹²⁶ If we take the example of Manchester United, it is impossible not to notice their sustainable sporting success over a little more than a decade (8 time Domestic League Champions, 1 UEFA Champions League), but their financial health and good management are not as externally obvious. Paddy Harverson, Director of Communications for Manchester United is quick to point out the fact that all stadium renovations have been paid for and that United has no debts.

Furthermore, they were the first football club to pay dividends to its shareholders.¹²⁷ An example which shows poor management and inconsistent results? Here there are many examples. The Belgian club Lommel was unable to finish the 2002-03 season because of their debts and AC Fiorentina in Italy has paid the ultimate price and had to be liquidated and reformed as a fourth division club.¹²⁸ Arnaud Rouger from the Ligue de Football Professionnel sums up the clubs in this way:

‘I have the feeling that all clubs are the same and marginally they are different. They have the same constraints. They are maximisers of victories under revenue constraints. Outside this, some have some international interests.’¹²⁹

Though our initial hypothesis was that clubs in different categories use different means to pursue their goals, our research has shown that most clubs are using a modern business approach to diversify their revenue streams in order to be less dependent on pitch results and more pitch performant.

124 See a complete list of European clubs listed on the Stock Exchange in appendix c.

125 Interview with Freddy RUMO.

126 Interview with Michel GUÉNAIRE

127 CIES visit to Old Trafford, October 2002.

128 Sport.fr – La lettre du Football No. 20.

Whether this is Real Madrid through brand extension and globalisation in Category A, FC Nantes Atlantique through developing non-football events in Category B, or Bolton Wanderers partnering with the DeVere Whites Hotel in Category C, we have found that clubs across all categories are using relatively the same means in different dimensions to pursue their goals.

Our research and analyses suggest that clubs are similar in their management of financial resources.

Do club-categories act differently when recruiting, developing and managing their Human Resources?

As the main Human Resource for football clubs is the players’ roster, we will focus on this area.

Rouger suggests two different strategies in this area, formation of young players or purchase of external talent.¹³⁰ But can this difference in strategy be applied in a categorical way? Our initial response is that again, this must be treated on a case by case basis. Clubs do use different strategies but this cannot be linked consistently with our category-criteria.

Freddy Rumo describes Neuchâtel Xamax as a regional club that develops young talent with the goal of staying competitive in the Swiss top division. Furthermore he hopes this sustained level will allow for the club to recruit some international players who would stay at the club for a short time and in this way help the younger players develop. He states the club’s strategy in this way:

‘Developing young players allows us to compete with the big clubs but at a much cheaper price. This is what we have been doing for a couple of years, what we will try to develop even more this year and also to sustain in the next 10-20 years because of the financial limitations the club will always have.’¹³¹

Is the strategy of “in-house” formation of players found across all categories? We have taken the rosters from one club in each category to analyse whether this strategy is found in different categories.

In Category A, Liverpool FC, a club regularly competing in European competition with an international market appeal and compare them with FC Nantes Atlantique in Category B and Atalanta Bergamasca Calcio, a club competing to stay in Italy’s Serie A.

Table 2.4 – Players coming from youth divisions

Club and Category Total Players Players from Club Percentage

Liverpool FC-Cat A 30 8 27%

FC Nantes Atlantique-Cat B 28 17 61%

Atalanta Bergamasca Calcio-Cat C 26 9 35%

Source: Based on Rosters as of June 25, 2003. Information gathered from club and league websites.

Our Category A club uses less than 30% of its Human Resources from its own developed players which is not identical with the Neuchâtel Xamax strategy. FC Nantes Atlantique is heavily reliant on home-grown players with over 60%. Lastly Atalanta, in the same category of Xamax, although well known for its policy of youth development is currently relying on just over one-third home-grown

129 Interview with Arnaud ROUGER

130 Interview with Arnaud ROUGER

131 Interview with Freddy RUMO

players, probably because it has already sold a large portion of the players it has formed in the last years. The variance is probably due to a difference in strategy. If we take one last example, another successful club from Category A, Manchester United, we can see a percentage of 52% of their current roster issuing from their youth development programme.¹³²

Another common strategy is to seek the best talent from outside the club’s area. Though the effects of the Bosman judgement will not be treated here, this has opened the door to more top professional players to enter leagues which are “shopping for players”. Again we will search for whether there are differences in how different categories of clubs act in the market for buying foreign players.

Figure 2.9 shows the number of foreign players per club in the FA Premier League in 1998-99.

Figure 2.9 –Premiership Foreign Players season 1998/99:

19

16 16

13 12 12 12 11 11 11 1 0 9 8 7

5 5 4 4 3 3

Chelsea Arsenal

Newcastle Liverpool Coventry Derby Sheff Wed

Leeds Utd.

Man Utd Tottenham

Nottm Forest West Ham Blackburn M'brough S'hampton Everton Leicester City

Charlton Wimbledon

Aston Villa

Source : Sir Norman Chester Research Centre, Fact Sheet 16 :The Bosman Ruling, Football Transfers and Foreign Footballers

B A

C A

C B

A

C B

West Ham, a Category-C club has 9 foreign players while Man United, a Cat -A club has only two more at 11. Compare this with Chelsea’s 19 foreigners for a Cat-B club and we can see from the English data that again relying on foreign players is just as much an individual club strategy as the reliance on home-grown youth players.

In conclusion, although the scale may be different, clubs across all three of our categories are engaging in similar activities in proportion to their means, both in the financial and human resource areas as crucial elements to the fulfilment of their ultimate goal, pitch success.

132 FA Premier League website. June 25, 2003.